The merger discussions are progressing as per the Budget announcements, sources here involved in the process said, without divulging details on whether these talks would be completed during this fiscal.
The Union Budget earlier this month had cleared the deck for the merger of three state-run general insurers into a huge single entity like the Life Insurance Corporation of India (LIC).
Under the current rules, there has to be four general insurers to execute such a merger. The proposed amendment to the the General Insurance Business (Nationalisation) Act, 1972, will give flexibility to the Centre to bring down the number to less than four.
The Finance Bill 2019 has proposed to amend the Act by substituting the words "only four companies" with the words "up to four companies" in section 16, sub-section (2). The section deals with schemes of reorganisation and empowers the Centre to merge or transfer one or two state-run general insurance companies to form a new company.
Apart from re-insurer General Insurance Corporation of India, there are four general insurers New India Assurance, Oriental Insurance, National Insurance and United India Assurance.
New India is listed and is the largest amongst all general insurers, including those in the private sector.
The Budget did not allocate any capital for infusion into the public sector general insurers as was demanded by them.
Under one of the options, the three other general insurers could possibly be merged with New India. The other option, which was announced in the Union Budget last year, is to merge National Insurance, United India Assurance and Oriental Insurance into a single entity, which will be subsequently listed. This, however, could not be done owing to the limitation in the current Act with respect to the number of players.
The sources expressed the hope that a clear plan will be worked out and efforts will be to ensure the merger goes through this fiscal year.
(Anjana Das can be contactd at anjana.d@.in)
( With inputs from IANS )